Midday Report: The Cost of Fox's Upcoming 24/7 Cable Sports Network

Fox (NWS) announced this week that it will launch a new 24-hour cable sports network, a direct challenge to ESPN.

Sports programming is one of the main reasons many people pay big monthly fees to cable and satellite companies. It's also the sweet spot for advertisers, TV program providers and cable companies.

The reason is that sports programs attract a live audience. Most of us don't want to tape a game and watch it later, like we might with CSI or Downton Abbey. Also, most live sports events are not available on mobile devices. And sports programs also attract the prime demographic for advertisers: young men.

The problem is, sports programming is very expensive. ESPN pays nearly $2 billion dollars a year to carry Monday night NFL games. Of course, ESPN and other channels pass that cost along to cable and satellite companies, and you know what that means -- higher costs for consumers.

Several big distributors have already tacked on a two-to-three dollar a month sports surcharge, whether you watch sports or not. A DirecTV (DTV) executive said this week that big increases in prices are likely to be the "new norm," and not just for sports.

Fox's new network, called Fox Sports 1, will allow it to charge providers more to carry its programming, especially since the company is likely to "bundle" it along with news and other channels.
And Fox Sports 1 will have a big head start over most new channels, since Fox is taking over the racecar channel Speed, with distribution into about 90 million homes, and converting it into the new sports network. And, of course, Fox will charge a lot more: Speed gets 22 cents a month for each subscriber; Fox Sports 1 could charge up to a dollar a month.

But that's nothing compared to the average price ESPN demands: $5-$15 a month.

And even though ESPN is the goliath in the industry, analysts expect Fox's new entry to succeed, partly because there seems to be an insatiable demand for sports programming.
Fox already has contracts to show certain college basketball and football games, NASCAR, soccer, and UFC fights.

And Fox has a great track record. It successfully took on ABC, CBS and NBC when those networks dominated prime time -- and, of course, it went after CNN when that was the only 24/7 news channel.